QUESTION 6 The following are excerpts from the Financial Statements of Byron's Bikes: 2020 $'000 2019 $'000 2018 $'000 Current Assets 280 305 185 185 505 Cash Short-term Investments Accounts Receivable Inventory Prepaid Expenses Total Current Assets 640 1,350 65 245 190 395 660 55 920 70 2,545 1,960 1,545 Current Liabilities Notes Payable Trade Creditors Total Current Liabilities 255 955 225 740 200 520 1,210 965 720 Other information: Item Net Credit Sales Cost of Goods Sold Net Credit Purchases 2020 S'000 5,775 4,620 5,050 2019 S'000 5,250 4,200 4,460 TASK (a) Using the information above, calculate the following for Byron's Bikes for 2019 and 2020: Current Ratio: Current Assets / Current Liabilities (1 point) Quick /Acid Test Ratio: (Current Assets - Inventory) / Current Liabilities (1 point) Days Debtors Ratio: (Average Trade Debtors / Sales Revenue) 365 (1 point) Days Inventory Ratio: (Average Inventory / Sales Revenue) x 365 (1 point) V. Days Creditors Ratio: (Average Trade Creditors / Net Credit Purchases) x 365 (1 point) The recent growth of Byron's Bikes has been fuelled by a relaxing of the credit criteria applied to potential customers wishing to purchase on credit. Using the ratios you calculated in (a), compare and contrast the liquidity position of Byron's Bikes from 2019 to 2020. (10 points) Explain two limitations of financial ratio analysis. (3 points) [5+10 3 -18 Marks)